Politics and Predictions

A few thoughts about prediction and politics.

Prediction markets
As some of my friends know, I expected Obama to win. I follow prediction markets like intrade.com. It is like a stock market where you can bet on the likelihood of future events. Here is a video that explains how it works. Longbets.org is similar site for long-term predictions. For the past several months, the predictions markets predicted that Obama would win. I think that prediction markets work for 2 main reasons: (1) they aggregate collective beliefs, and (2) when people have money on the line, they give more thought to their choices.

Predictions for the next 4 years
Individuals are terrible at prediction in general. However, according to the psychologist Philip Tetlock, some people are better at prediction than others. According to Tetlock, there are 2 types of people—hedgehogs and foxes. Roughly speaking, hedgehogs know one big thing; foxes know many things. Tetlock's fascinating studies show that foxes tend to be more accurate forecasters than hedgehogs.

Because of my eclectic interests (design, economics, philosophy, finance, science, religion) I think I have more of a fox approach to life. Here are few of my own testable predictions for the next four years. 

  • Employment numbers will improve by 2016. Today unemployment is 7.9 percent. I think it will be closer to 6 percent by 2016. This will happen in spite of the policies of the current administration. (.7)
  • The united states will lose economic freedom as measured by economic freedom indexes that measure such indicators as the rule of law, limited government, regulatory efficiency, and open markets. In 2008 both the Index of Economic Freedom and the Economic Freedom of the World Annual Report ranked America 5th and 10th respectively among all nations. In 2012, America was ranked 10th and 18th respectively.  I predict that we will be at least 2 rankings lower according to both indexes. (.9)
  • Both democrat and republican presidential candidates will shift to the left and favor more left-leaning policies than the average presidential candidate since WW2. (.75)
  • No 3rd party candidate will have enough followers to get elected in 2016. (1.0)
  • Health care costs will be higher in 2016 than today mostly because of Obamacare. (.9)
  • There will be at least one terrorist attack from Islamic fundamentalists on American soil in the next 4 years. (.6)
  • Obama will replace at least one more supreme court justice by 2016 (.9) Two more justices (.65) 
  • Price Inflation as measured by the CPI will be 10% higher in 2016 than it is today. ( I think we will have slower inflation in the first 2 years than in the second 2 years) (.75)

I have assigned probabilities as indicated in orange. 0 means that I am totally confident that the prediction will never happen. 1.0 means that I am 100% confident that it will definitely happen. I include these to "calibrate" my predictions according to Tetlock's methods of prediction tracking.

What are your predictions in the next 4 years? Write them in the comments below and let's see which predictions turn out to be correct in 2016.